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Net Zero, carbon capture and hydrogen: Regulatory developments 

960 640 Stuart O'Brien

By Matt Lewy (pictured), Energy Partner at law firm Womble Bond Dickinson

The UK government is pressing ahead with the development of the regulatory regime for carbon capture, utilisation and storage (CCUS), following the latest suite of updated business models published in May 2021.

Ultimately the CCUS regime will look like many regulated utilities, with a fixed (or regulated asset base) return paid to operators and investors. That said, there is risk inherent in developing the transport and storage components of a technology largely unproven at significant scale. This is coupled with a need to ensure enough power plants and industrial emitters connect to those systems at an early stage, in order to make them financially viable.

The business model updates look at options for mitigating those risks, with the government ultimately providing backstop support. At this stage, it has not been confirmed who will be the regulator for the industry, and whether this role will be split between the onshore and offshore elements.

The government is running a procurement process, with nascent CCUS clusters in UK industrial heartlands bidding to become one of two priority, or track-1, clusters. These will work with the government in implementing the regulatory regime and developing the returns model both for the development and operational phases of each project. The intention is to apply lessons learnt from the priority clusters, which on current projections will be operational by the mid-2020s, to smooth the path for future investment.

The announcement of the priority clusters is pencilled in for 9 August 2021. There are probably five or six viable proposals under serious consideration. These include St Fergus in Aberdeenshire and Teesside. Whichever of the clusters are selected there will be a certain amount of levelling-up achieved, as there is a requirement to include a significant component of local supply chain content, with associated employment opportunities, within the cluster bidding process. In connection with this, the government has launched a supply chain mapping exercise, the intention being to ensure the UK becomes a market leader in the industry.

It is telling that the CCUS regime is significantly more advanced than that for hydrogen. The priority appears to be the decarbonisation of heavy industry, and learning to apply CCUS to natural gas. Gas power with CCUS will be used to provide electricity whilst the UK scales up renewable electricity generation and addresses its intermittency. Gas with CCUS will also be used in the production of blue hydrogen.

A further update on the use of hydrogen and its regulatory regime is expected from the government shortly. Whether this extends to more long term uses of hydrogen, i.e. outside the confines of localised clusters, such as in domestic heating and mass transport systems, remains to be seen.

US pledges $43 million to carbon capture technologies

960 640 Stuart O'Brien

The U.S. Department of Energy’s (DOE) Advanced Research Projects Agency-Energy (ARPA-E) has announced up to $43 million in funding to develop carbon capture and storage (CCS) technologies.

The goal is to enable power generators to be responsive to grid conditions in a high variable renewable energy (VRE) penetration environment. 

The FLExible Carbon Capture and Storage (FLECCS) program seeks to develop technologies that address difficulties in decarbonisation of electricity systems, focusing specifically on complications in CCS design, operations, and commercialization potential with the increasing penetration of high VRE sources such as wind and solar power. 

“Flexible CCS technology has the potential to achieve unprecedented carbon capture that will revolutionize the market,” said Deputy Secretary Dan Brouillette. “The FLECCS program will quickly advance our carbon capture technology to bring us closer to flexible, low-cost, net-zero carbon electricity systems.”

FLECCS projects will develop retrofits to existing power generators as well as novel systems with carbon-containing fuel input and electricity output. 

The program will have two phases. Phase 1 will focus on designing and optimizing CCS processes that enable flexibility on a high-VRE grid. Phase 2 will focus on building components, unit operations, and small prototype systems to reduce the technical risks and costs associated with CCS systems.

Projects will be selected to move from Phase 1 to Phase 2 at the conclusion of the initial funding period, based on the output and capacity expansion analysis of the projects.

A portion of the funding will be made specifically available for qualifying small business applicants under ARPA-E’s Small Business Innovation Research (SBIR) program. 

To learn more about ARPA-E’s FLECCS program, click here.